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Public subsidies and the sources of venture capital

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  • Berger, Marius
  • Hottenrott, Hanna

Abstract

Research suggests that public subsidies for newly founded firms have a positive effect on follow-on financing, in particular, Venture Capital (VC). This study differentiates between Government VC, Independent VC, Corporate VC, and Business Angels and shows that public subsidies are not relevant for all of these sources. When accounting for firm characteristics that drive both selection into public subsidies as well as into VC financing through econometric matching techniques, we find that subsidies are only linked to Government VC and Business Angel financing.

Suggested Citation

  • Berger, Marius & Hottenrott, Hanna, 2020. "Public subsidies and the sources of venture capital," ZEW Discussion Papers 20-086, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:20086
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    File URL: https://www.econstor.eu/bitstream/10419/228450/1/1743551924.pdf
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    References listed on IDEAS

    as
    1. Iacus, Stefano M. & King, Gary & Porro, Giuseppe, 2011. "Multivariate Matching Methods That Are Monotonic Imbalance Bounding," Journal of the American Statistical Association, American Statistical Association, vol. 106(493), pages 345-361.
    2. Bersch, Johannes & Gottschalk, Sandra & Müller, Bettina & Niefert, Michaela, 2014. "The Mannheim Enterprise Panel (MUP) and firm statistics for Germany," ZEW Discussion Papers 14-104, ZEW - Leibniz Centre for European Economic Research.
    3. Helmut Fryges & Sandra Gottschalk & Karsten Kohn, 2010. "The KfW/ZEW Start-up Panel: Design and Research Potential," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(1), pages 117-132.
    4. Dan K. Hsu & J. Michael Haynie & Sharon A. Simmons & Alexander McKelvie, 2014. "What matters, matters differently: a conjoint analysis of the decision policies of angel and venture capital investors," Venture Capital, Taylor & Francis Journals, vol. 16(1), pages 1-25, January.
    5. Josh Lerner & Ramana Nanda, 2020. "Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 237-261, Summer.
    6. Hottenrott, Hanna & Richstein, Robert, 2020. "Start-up subsidies: Does the policy instrument matter?," Research Policy, Elsevier, vol. 49(1).
    7. Iacus, Stefano M. & King, Gary & Porro, Giuseppe, 2012. "Causal Inference without Balance Checking: Coarsened Exact Matching," Political Analysis, Cambridge University Press, vol. 20(1), pages 1-24, January.
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    Cited by:

    1. Berger, Marius & Gottschalk, Sandra, 2021. "Financing and advising early stage startups: The effect of angel investor subsidies," ZEW Discussion Papers 21-069, ZEW - Leibniz Centre for European Economic Research.
    2. Milani, Sahar & Neumann, Rebecca, 2022. "R&D, patents, and financing constraints of the top global innovative firms," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 546-567.

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    More about this item

    Keywords

    Start-up Subsidies; Entrepreneurship Policy; Entrepreneurial Finance; Venture Capital; Business Angels;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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